For years, Democrats have promised to raise taxes on these investors, who pay a significantly lower interest rate on their earnings than ordinary workers. But just as they completed that goal last week, Sinema pushed through a series of changes to her party’s $740 billion election-year spending package, eliminating a proposed increase in the “carried interest” tax on private equity profits while ensuring a $35 billion exemption that will save much of the industry from a separate tax hike other huge companies must now pay. The bill, with Cinema’s amendments intact, was finally approved by Congress on Friday and is expected to be signed by President Joe Biden next week. Sinema has long aligned herself with the interests of private equity, hedge funds and venture capital, helping her earn at least $1.5 million in campaign contributions since she was elected to the House a decade ago. But the $983,000 she has raised since last summer more than doubled what the industry gave her during all of her previous years in Congress combined, according to an Associated Press review of campaign finance disclosures. The donations, which make Sinema one of the industry’s top grantees in Congress, are a reminder of how high-powered lobbying campaigns can have dramatic effects on how legislation is made, particularly in the evenly divided Senate where there are no votes of Democrats to spare. They also highlight a degree of political risk for Cinema, whose unapologetic defense of the industry’s favorable tax treatment is seen by many in her party as indefensible. “From their perspective, it’s a million dollars very well spent,” said Dean Baker, senior economist at the Center for Economic and Policy Research, a liberal think tank. “It’s very rare to see this immediate return on your investment. So I guess I would congratulate them.” Sinema’s office declined to make her available for an interview. Hannah Hurley, a spokeswoman for Sinema, acknowledged that the senator shares some of the industry’s views on taxation, but rejected any suggestion that the donations influenced her thinking. “Senator Sinema makes every decision based on one criterion: what’s best for Arizona,” Hurley said in a statement. “He has been clear and consistent for more than a year that he will only support tax reform and revenue options that support Arizona’s economic growth and competitiveness.” The American Investment Council, a trade group that lobbies on behalf of private equity, also defended its push to defeat the tax provisions. “Our team has worked to ensure that members of Congress from both sides of the aisle understand how private equity directly employs workers and supports small businesses throughout their communities,” said Drew Maloney, CEO and president of organization. Sinema’s defense of the tax treatment of wealthy investors offers a jarring contrast to her past as a Green Party activist and self-described “Prada socialist,” who once likened accepting campaign cash to “bribery” and later called “big corporations and the rich to pay their share” before launching her first campaign for Congress in 2012. He’s been much more magnanimous since then, praising private equity in 2016 from the House for providing “billions of dollars every year to Main Street businesses.” After her election to the Senate, Sinema interned during the 2020 congressional recess at a private equity magnate’s boutique winery in northern California. Growing industry contributions to Sinema date back to last summer. That’s when he first made it clear that he would not support an increase in the carried interest tax, as well as other corporate and business tax increases that were included in an earlier iteration of Biden’s agenda. During a two-week period in September alone, Sinema collected $47,100 in contributions from 16 high-ranking officials from private equity firm Welsh, Carson, Anderson & Stowe, records show. Employees and executives of KKR, another private equity behemoth, contributed $44,100 to Sinema during a two-month period in late 2021. In some cases, the families of private equity managers were also involved. David Belluck, a partner at Riverside Partners, made a maximum contribution of $5,800 to Sinema one day in late June. So did three of his college-age children, with the family collectively donating $23,200, records show. “I generally support centrist Democrats, and her seat is important to maintaining the Democratic majority in the Senate,” Belluk said, adding that his family has known Cinema since she was elected to Congress. “She and I have never discussed private equity taxation.” The industry donations coincide with a $26 million lobbying effort led by investment firm Blackstone that culminated in the Senate last weekend. By the time the bill was up for debate during a marathon series of votes, Sinema had already forced Democrats to abandon the carried interest tax hike. “Senator Sinema said she would not vote for the bill unless we get it out,” Senate Majority Leader Chuck Schumer told reporters last week. “We had no choice.” But after private equity lobbyists discovered a provision in the bill that would subject many of them to a separate 15 percent minimum corporate tax, they urgently pressed Sinema and other centrist Democrats for changes, according to emails and four people with direct knowledge of the subject who requested anonymity to discuss the internal deliberations. “Given the disruptive nature of this development, we need as many offices as possible to address their concerns with Leader Schumer’s office,” Blackstone lobbyist Ryan McConaghy wrote in an email Saturday afternoon obtained by the AP, the which included proposed language to amend the bill. “Would you and your boss be willing to raise the alarm on this and raise concerns with Schumer and the team?” McConaghy did not respond to a request for comment. Sinema worked with Republicans on an amendment that removed the minimum corporate tax on private equity from the bill, which a handful of vulnerable Democrats also voted for. “Since her time in Congress, Kyrsten has consistently advocated for pro-growth policies that encourage job creation across Arizona. Her positions on tax policy and her focus on growing Arizona’s economy and competitiveness are long-standing and well-known,” said Sinema spokesman Hurley. But many in her party disagree. They say the favorable tax treatment does little to boost the overall economy and argue there is little persuasive evidence to suggest its benefits are enjoyed beyond some of the wealthiest investors. Some of Sinema’s donors support their cause. Blackstone, a major source of campaign contributions, owns large tracts of real estate in Sinema’s home state of Arizona. The company was condemned by United Nations experts in 2019, who said Blackstone’s financial model was responsible for a “financialization of housing” that has driven up rents and housing costs, “pushing low-income and increasingly middle income from their homes”. Blackstone employees, executives and their family members have given Sinema $44,000 since 2018, according to filings. In a statement, Blackstone called the UN experts’ claims “false and misleading” and said all employee contributions were “strictly personal”. The company added that it is “incredibly proud of its investment in housing”. Another major financial services sponsor is Centerbridge Partners, a New York-based firm that buys the debt of distressed governments and corporations and often uses hard-line tactics to extract value. Since 2017, Sinema has raised at least $29,000 from donors connected to the company, including co-founder Mark Gallogly and his wife, Elizabeth Strickler, records show. In 2012, Centerbridge Partners bought Arizona-based restaurant chain PF Chang’s for about $1 billion. After loading the struggling company with $675 million in debt, they sold it to another private equity group in 2019, according to Bloomberg News. The company received a $10 million coronavirus relief loan to cover payroll, which the federal government later forgave, but it lost jobs and closed locations as it battled the pandemic. Centerbridge Partners was also part of a consortium of hedge funds that helped usher in an era of austerity in Puerto Rico after it bought billions of dollars of the island government’s $72 billion debt — and filed legal proceedings for collection. An affiliate of Centerbridge Partners was among a group of creditors who repeatedly sued one of the US territory’s pension funds. In a 2016 lawsuit, the group of creditors asked a judge to divert money from a Puerto Rico pension fund to collect. A spokesman for Centerbridge could not be reached for comment. Liberal activists in Arizona say they plan to make Sinema’s reliance on donations from wealthy investors a campaign issue when she runs for re-election in 2024. “There are many views on how to win, but there is no world in which it is politically smart to fight for favorable tax treatment for the richest people in the country,” said Emily Kirkland, a policy consultant who works for progressive candidates. “It’s absolutely going to be a strong issue.”
Associated Press writer Josh Boak contributed to this report.
